Accord elusive on bailout for Greece

EU at odds about repayment terms

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Municipal workers demonstrated against the new austerity measures in Athens on Tuesday.

By Carlo Piovano and Don MelvinAssociated Press
November 21, 2012

BRUSSELS — European Union officials planned to make a fresh try Tuesday to reach a political accord on desperately needed bailout loans for Greece — an agreement that eluded them last week.

The Irish finance minister, Michael Noonan, said a main point of contention at the meeting in Brussels among officials of the 17 European Union countries that use the euro is whether to give Greece an extra two years to get to a point where it can raise its own funds — and how to finance that extension.

The finance ministers need to agree on the extension before they can pay Greece the $40.2 billion rescue loan that has been kept on hold for months. When previously frozen aid is considered along with further aid scheduled to be disbursed later this year, that total could reach $56.3 billion, said a spokesman for Jean-Claude Juncker, who chairs the eurozone finance ministers’ meetings. As he went into Tuesday’s meeting, Juncker said Greece deserved the aid.

‘‘It is clear that Greece has delivered, but we still have to agree on the details,’’ he said. ‘‘I expect the chances are good that we will come to an agreement tonight, agreed by all sides, but I am not completely sure about this.’’

The finance ministers had hoped to settle on the conditions for aid last week, but their meeting ended without agreement. That delayed the loan payment, pushing the country closer to bankruptcy and a possible exit from the euro.

Laboring under a mountain of debt, Greece has been relying since 2010 on international bailout loans, under terms supervised by the so-called troika — the International Monetary Fund, the European Central Bank, and the European Commission, which is the 27-country European Union’s executive branch. To receive the aid, Greece has had to impose strict austerity and reform measures. Two weeks ago, the coalition government narrowly succeeded in passing a $17.3 billion package of budget cuts, tax increases, and reforms to secure the latest loan payment.

The main aim of the bailout program is to right the country’s economy and get it to a point where it no longer relies on international aid and can independently raise money on the debt markets.

The reform program attached to the bailout was supposed to steadily reduce Greece’s debt to 120 percent of its annual gross domestic product — a condition imposed by the IMF, whose consent is needed if funds are to be released. The deadline for this target was 2020 but it’s been clear for months that the country is way off track for achieving that.

Last week’s meeting revealed disagreement on whether Greece should be given until 2022 to reach the 120 percent target. The IMF is insisting that Greece stick to the original deadline.

The question of debt sustainability is as important as it is divisive: If Greece’s debts can’t be reduced to a level where the country can afford to pay them, the billions of euros in bailout loans given to Greece will have been wasted.

Greece, however, was granted one extension at last week’s meeting — an extra two years until 2016 to implement its program of austerity reforms and deficit cuts.

By giving the government more time, it is hoped the impact on its struggling economy would be lightened.